GBP/USD: Three reasons to doubt the rally

GBP/USD has been advancing but lack of details on Brexit, weak UK data and coronavirus concerns may cause the rally to run into trouble, Yohay Elam, an analyst at FXStreet, briefs.

Key quotes

“While both Brussels and London praised the online meeting, they provided no details about the sensitive topics such as trade and fisheries. They did announce a general timetable – resuming talks on June 29 in a different format and striving to approve an accord in October's EU Summit. However, without concessions from both sides, it is hard to see the optimism holding up.”

“The headline Unemployment Rate surprised by remaining at only 3.9% in April – refusing to rise for now. Yet that lagging indicator does not tell the full story. The Claimant Count Change jumped by 528,000 in May, worse than expected. Moreover, April's applications were revised up to over 1 million. That means the number of the jobless is set to rise. To add insult to injury, Wage growth ground to 1% in April, worse than 1.4% projected. Decelerating salary growth does not bode well for the service-dependent economy.” 

“The UK still suffers from a stubbornly high curve in comparison to peers in the continent, despite improvement. The pace of reopening is slower and may lead to more economic damage. That may weigh on sterling.”